Does inflation affect tourism and hospitality stock prices? A time–frequency analysis

After decades of benign price increases, inflation has resurfaced as a concern for firms and investors in the tourism and hospitality sectors. Characterised by large capital investment needs, significant labour costs, and heavy demand for raw materials, both tourism and hospitality may be particularly susceptible to inflation. This paper examines links between shocks to inflation and the returns of tourism and hospitality-focused firms. Empirical findings indicate a transitory relationship between inflation shocks and tourism and hospitality returns, focused predominantly at short horizons and which, when present, tends to be negative. The relationship weakens once the market influence is removed from the analysed stocks, indicating a limited specific impact of inflation on the sector. Some distinctions emerge in findings for the analysed subsectors, with inflationary shocks having a more durable influence on casinos and gambling stock returns.